Report: Clean Power Is Moving (Gradually) Into Americans' Homes

Americans are increasingly relying more on natural gas and renewable energy for heat, power and transportation. From 2007 to 2012, natural gas use grew from 23.4% to 27.2% while renewable energy consumption rose from 6.4% to 9.4%, according to a report released on Thursday.

At the same time, the use of coal fell from 22.5% to 18.1% in that 5-year period. Nine gigawatts of coal power plants retired in 2012. But in the short term, at least, coal will remain a key source of energy for the U.S. mainly because the cost of running coal and natural gas power plants remains comparable.

The gradual switch to cleaner sources of energy has contributed to a 13% decline in carbon emissions from 2007 to 2012, the report said.

The report, put together by Bloomberg New Energy Finance and the Business Council on Sustainable Energy, seeks to highlight the successes of the clean power industries. It also shows yet again the teaming up of renewable energy and natural gas lobbying groups to grab the attention of policy makers and the public.

While cheap natural gas can be a threat to solar and wind energy development — utilities might prefer to build more natural gas power plants that can deliver electricity around the clock — natural gas also could play a complementary role. Natural gas power plants can increase or decrease their production relatively quickly, and that ability could help to make up for any shortfall in wind or solar generation, which varies depending on weather conditions, in order to meet demand.

Energy storage, such as using trailers of batteries, to store renewable electricity also will help utilities manage the supply and demand of solar and wind. But energy storage technologies are still too expensive for any widespread use.

Renewable energy proponents dream of the days when wind, solar and other clean sources of electricity will account for over half of the U.S. power consumption. But that goal is long way off. In fact, coal and natural gas will likely remain the two most popular sources of energy and account for 65% of the electricity generation by 2040, according to the U.S. Energy Information Administration.

State mandates for renewable energy generation have driven much of the increase in solar, wind, geothermal, biomass and other forms of clean power over the past decade.

The wind energy industry experienced a banner year in 2012. It installed 13.1 gigawatts of wind turbines, a 28% growth from 2011. The fear of losing a federal production tax credit by the end of the year helped to drive the boom, though. In early January, lawmakers gave the tax credit a one-year extension and relaxed the eligibility rules so that wind farms that begin construction in 2013 but won’t be done until 2014 will still qualify for the tax credit.

Excluding government subsidies, the cost of producing wind energy fell from 9 cents per kilowatt-hour in 2009 to 8 cents per kilowatt-hour in 2012.

The solar market likely added 3.2 gigawatts of new generation in 2012, though the final count has yet to be done. The figure includes big solar farms as well as rooftop systems on homes and businesses. The growth of solar energy use has come partly at the expense of the rapidly declining prices for solar panels. A glut of solar panels worldwide over the past two years has caused bankruptcies of dozens of solar panel and component makers in the U.S., Germany and elsewhere.

Solar power project developers also have gotten better at cutting costs in other areas, such as securing permits and raising project financing. The cost of producing solar electricity by large solar power plants plummeted from 31 cents per kilowatt-hour in 2009 to 14 cents per kilowatt-hour in 2012. These figures don’t take into account government incentives. The decline hasn’t been as dramatic for rooftop systems because they lack the large scale to make cost reduction an easier task to accomplish.

Government incentives, in forms of tax credits, rebates and grants, have played a big role in boosting the solar market growth. Many of the giant solar farms that are materializing in California, Arizona and Nevada are making use of government loans. Solar technology developers also are receiving big government support to complete their research and bring their technologies to the market.

The report also highlighted the sales of all-electric and gasoline-electric hybrid cars. It noted that the sales of those vehicles hit 488,000 in 2012 and represented 3.2% of the passenger car sales in the U.S. That number fell short of the expectations by carmakers and their suppliers, including lithium-ion battery makers. Many battery makers have had to scramble to seek customers outside of the car market or line up investors who have the financial power to keep the battery companies going. A123 Systems’ sale to the Wanxiang Group is a prime example.

The report is coming out just after President Obama’s speech at the inauguration last week gave hopes that the country will see more renewable energy-friendly federal policies. Obama certainly promised to devote resources to support green tech development and fight climate change. But whether lawmakers will go along and produce meaningful results is, of course, too early to tell.

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People need to understand some technical issues that marry wind and solar to natural gas. Large integration of wind and solar to the power grid is not possible without the firming capacity of fossil fuel for balance that avoids blackouts. From an operational point of view natural gas is better all around for this task than coal.

This puts us on a path for a power grid dependent primarily on natural gas. Renewable energy proponents are now pushing the concept that we need wind and solar to diversify our fuel supply avoiding over dependence on natural gas.

The dirty little secret is that this is not true. Wind and solar integration reduces natural gas efficiency to the point where little to no fuel is saved and little to no carbon is avoided.

The natural gas crowd knows this, which is why they do not fear renewable energy. Everyone wins except the consumer who ends up paying more than twice as much to keep the lights on.

It’s true that in near term, as far as we know, natural gas will play a role in the integration of solar/wind into the grid. Renewable energy proponents used to put natural gas in the same column as coal. But many of them have in fact shifted their stance to embrace natural gas publicly. It’s harder to know what natural gas will play in the long term (and I mean decades from now). Much cheaper battery tech and other still unforeseen tech development could gradually strip natural gas its role in balancing the load.